Why $300B of SaaS Revenue Is Trapped & How the $19.9T AI Agent Economy Unlocks It

0:00I remember I talked to EQT and over one conversation they said yeah this is something that we want to do They closed the doors and a term sheet came out on the other end. And, you know, when we got money from Sequoia, I called Pat Grady and he said, call me when you land. And when we landed, he's like, yeah, this needs to exist. Let's talk. There is$300 billion of SaaS TAM out there that needs to move to agents. Like we firmly believe the seed model is dead and SaaS companies got to move from seed model to agents. We're trying to rescue SaaS out of like that cliff they're about to run into back to growth so they can start selling agents.

0:27Just like Stripe in the early days, a lot of our customers haven't been born yet. So we're selling for the customers of the future. We have a strong volunteer DNA. We are a very high agency kind of company. When somebody joins, they are given a problem space to work into, and it's up to them to go figure out what to build. We still have to build the engine of growth for all the AI agent companies born right now and to be born. Manny, welcome to Sorcery. Thank you for having me. Thank you for having me in London at your office. Yeah, this is pretty great. This is an awesome space. How did you find this?

0:56Thank you. We were homeless for a while, and going from WeWork to WeWork. and we needed a place. This place was just being built and my wife found it and she talked the guy who was mining the construction site into letting her check it out. And then she sent me photos and she said, I find your spot. And then we all moved in. That was it. And you're right next to King's Cross and DeepMind and Facebook. 100%. They are inspired by the work we're doing. What brought you to start paid after scaling outreach to$4.4 billion? dollars? Well, I've had a problem scaling my AI agent business at Outreach that the market hasn't solved.

1:38So if you look at all the monetization out there, it's built for what we had 10 years ago. So you either have seed-based solutions or you have metering solutions that force you to meter the same thing over and over. Agents perform work. Agents deliver real outcomes. Agents replace some of the human labor that we're seeing right now. And there was no solution for understanding what the agent is doing, helping you monetizing that, and then watching your agent cost. So now we're finally coming out that agents are running on 30 % to 40 % gross margins, sometimes even lower. But when you have a business that is running on lower margins, you need to capture more revenue to ensure that you have a viable business.

2:19So there was no system for you to manage the entirety of the business and the entirety of the growth of an agentic company. So we set out to build that. We set out to build the engine of growth for all the AI agent companies born right now and to be born tomorrow. And why London? Why not Silicon Valley? I know you were in Seattle. I was in Seattle. I was in Seattle. I think London is a cheat. I think London was what Seattle was 10 years ago, where nobody is thinking about building in London. So you have access to some of the top talented engineers in the planet. Just think about this. London has 12 million people compared to Seattle that has barely a million and a half, and San Francisco barely makes a million.

2:58Here you have 12 million. So like the likelihood of you finding great people is super high. Number two, immigration laws are easier. So you can get people from Germany or Spain or whatever to just come work for you here. And number three, you have four of the top computer science schools in the planet, like right here in London or like in the area. So I think talent-wise, I think it's unbeatable. We raised$21 million. dollars 21 million dollars to date sorry 31 million 31 million let's just keep upping it 31 million dollars oh maybe it's just exactly we're in the bubble again let's go that's amazing so what was the process for funding like in this new go-around and who did you raise from it was a lot easier i think i think for a second time i know yeah well i raised almost 400 million for my last company.

3:47So like, you know, when I was raising 10 or 11, it was kind of adorable. Like, I don't even remember that stuff. I raised 10 or 11 billion dollars. I used to negotiate around 10 or 11 million dollars when it's a hundred million dollar round. So like, it was weird to be frank, for me to raise that little of cash. But on the other hand, like, we don't need that much cash to get started. And, you know, we're proving a lot of things. So it was fairly straightforward. Just call a couple of people. I remember I talked to EQT and over one conversation they said yeah this is something that we want to do they closed the doors and a term sheet came out on the other end and you know when we got money from Sequoia I called Pat Grady on my way back from Spain and he said call me when you land and when we landed he's like yeah this needs to exist let's talk so like it's it was a lot faster you know based on my own conviction and based on what the market needs yeah and we got introduced by GTM Fund Max was my first call really when I had the idea yep Why?

4:43Because Max is a very talented guy to know what's hot and what's not. And I needed to know the zeitgeist. You see what I mean? Like, am I in the zeitgeist or am I out of the zeitgeist? Because I've been running a company for almost 15 years and I haven't been out and about talking to VCs, trying to fundraise. So I wanted to know, I had this problem in my head that I had an outreach of, how do I monetize agents and how do I manage the agentic business? And I was like, well i'm thinking of building this this is how i'm thinking of building do you think that people will be interested in it i mean the market is not quite there yet but i believe the market will be and he's like yeah this is hot and so we talked a little bit about like how we would build it but yeah he he's a friend and he used to work for me about his company so we go way back but i that is his his superpower discerning hot versus not hot yeah and i watched this interview you did with pat from sequoia yeah yeah what was that like for you like working with them well i already worked with them at outreach and we took money on the growth round and then they you know they were contesters for my C round so I got to know Pat and I got to know Matt Miller and a bunch of people from the team I got to meet Doug Leone which is it's kind of like meeting God a little bit I mean such a legend you know so I already knew the team and I already knew they were high quality individuals so this is why he was one of the first calls can you just break down the state of ai agents like where are we because it is brand new territory you're building something that's pretty i mean it's pretty advanced like you're you're doing something that is in the infrastructure layer essentially yeah so could you just break this down and why you got that much conviction for it a lot is said about founders live in the future and that you strive to bring it forward i felt like i went to the future of work and i saw a world where you know half the employees are are agentic you know uh agentic beings if you would and you know how do i make that future forward is has been my obsession since you know that idea came to my head and right now we're we're in the early stages right like we don't like most people argue about what i what what is an agent what isn't an agent and but we also seen how you know the process of like you know we had agents that were fairly deterministic you know entities that will do one thing and then and do the next, and do the next, and do the next, and close the ticket, down to, like, you know, architectures where you have, like, a brain that calls tools, and is very independent, you know, high autonomy, high attrition kind of work.

7:08So I feel like if you look at the speed by which LLMs are advancing, you know, the architecture of agents is not even catching up yet to the state of the art of LLMs, and the state of the art of LLMs continue to get better. So, like, I feel like we're going to be in this state for a while in which agents are just going to get smarter. They're going to do more work. They're going to be able to like survive more pilots. More companies are going to be born in the agentic world. So if you look at the, you know, customer support alone has like, you know, five strong competitors that are all vying for the same business and they're all growing.

7:37So like everywhere we're seeing agents being born and being built are in the same state. They're all growing. They're all growing fast. There's like on bottomless demand for the work that they do. Then it's mostly because, you know, they are doing real work. They're replacing real labor. They're, you know, they're, you know, avoiding you high, you know, getting more headcount on. So like it's, it's producing real benefits and real ROI, tangible ROI. Where are you seeing the top use case for AI agents? For anything that is sort of like rote work that is semi-repetitive with some amount of imagination, AI agents are sticking and landing, you know, super well.

8:14So customer service, but not like customer service in terms of reset my password, like how do I do X or do Y. They're resolving more complex problems. They're trying to figure out whether your thing is in warranty or not, and I'm selling you something if it's not. We're seeing mortgages being created by agents. We're seeing car dealers run by agents. We're seeing HR system, compensation systems are starting to be run by agents. So they're just everywhere. And you're seeing a lot of green shoots. Like we're in the world of green shoots right now. And we, you know, a lot of our customers are relatively early and just like Stripe in the early days, a lot of our customers haven't been born yet.

8:54So we're selling for the customers of the future. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture-backed startups in the U.S. Nearly 40 % of startups fail because they run out of cash. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, shipping away at it with fees, Brex's designs help you spend smarter and move faster. Their all-in-one solution combines checking, treasury, and FDIC protection into one powerful account. You can send and receive money globally at lightning speeds, get 20 times the standard FDIC coverage through their partner banks, and even high yield from day one.

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10:21With Turing, discover how AI can accelerate your business growth. To learn more, visit Turing.com slash sorcery. Spelt S-O-U-R-C-E-R-Y. That's Turing.com slash sorcery. So where does paid get in? We get in in two places. We either get in, so we're building a sales source product. We want to get in as early as somebody has an idea. So if somebody has a weekend project, like Glovable, for instance, if you have a weekend project that they want to make sure that they get paid for, you implement it, cheap and cheap, and off you go. Or there's$300 billion of SaaS TAM out there that needs to move to agents.

10:56We firmly believe the seed model is dead, and SaaS companies got to move from seed model to agents. And we're also building for them. We're trying to rescue SaaS out of that cliff they're about to run back to growth so they can start selling agents. So those are our two models. Either we sell to them and we do a lot of consulting for them too, or it's free, cheap and cheery, go for it, and high adoption. Who are your customers so far? So we have about 40 customers. We're super early. But the early ones are, you know, we have about 80 % of them are startups in terms of count of numbers. In terms of kind of revenue, the majority of the revenue comes from like SaaS companies moving to agents.

11:36And then I'm curious. So Sorcery is sponsored by Brex and they're all about performance, spending smarter, moving faster. As you approach this new business in the AI era, how do you think about the balance, the tradeoff between spending on growth, efficiencies? How are you feeling between that? I already built a company that I made all the mistakes that I could put up made in the book. And one of the biggest mistakes people made or one misconception people have is that you can grow out of inefficiencies. I think inefficiencies are set in stone in your DNA from the very beginning. So if you're not efficient on how you build and how you spend your money and how you acquire customers from the go, you can scale into a massive exit.

12:19So for us, efficiency is something that we think a lot about in terms of efficiency of customer acquisition. So for instance, right now, it's just me and my co-founder doing all the selling. Why? Because I want to make sure that we have the playbook super aligned and super tight and it's repeatable where we can bring in one seller, two sellers, 20 sellers, 100 sellers. without having to reinvent the playbook or spend a lot of time sitting on sellers who are not getting productive. The same thing with SoulServe. We want to make sure that SoulServe is ready before we scale so that SoulServe is an engine of growth as opposed to we having to go hunt every single deal out there.

12:56So efficiency in our mind has to be baked in. And it's not because we don't have the cash. It's more because I've seen it that it doesn't scale. You don't become efficient over time. You stay the way that you started. what's your go-to-market approach right now we cold call cold call call and sell you're not using agents for that uh we don't we don't have the capacity to take a ton of customers we're only 14 people so like we're you know making a list and cold calling what's the onboarding process like for them like how are you testing and implementing um before i answer that question so we qualify them by saying like how like are you are you seeing is agents a high priority item and you're in your roadmap and you go to market and your strategy.

13:37If it's not, yes. If it's not like one or priority one or priority two, we hang up. We're like, thank you. We'll send you some material, but you're not the right fit. Once it's priority one, priority two, then we immediately engage with the CRO and the CTO because two problems happens in SaaS, especially scale SaaS, is that the CTO is the one building the agents and the one that is understanding the technology behind it, but the CROs are the one that has to make money on them. You see what I mean? So they have to understand, how are they going to sell that agent? What kind of value they're going to capture?

14:08Because it's not the same proceed, right? So on a proceed basis, you can go and count how many people you have and move in that's your revenue. In agents, you can count how many open headcounts you have. In agents, you can count what is your BPO contract that you're going to cut in half so that you can pay your agents. And in agents, you can count how many resolutions you want to get or how much of your stack you want to consolidate. So there's all these other pockets of value that you can extract from when you're selling agents that go-to-market organizations don't understand. So we spend quite a bit of time educating them of like, look, your contract used to be 50K because it used to be 50 seats, but your contracts could be 500K because you're dipping into the headcount budget pool as opposed to the IT budget pool.

14:49So that re-education we help with and we help make sure that the agent is instrumented in such a way that you can capture all the value and then you can show the value to the customer. So it's a little bit heavy in the consultancy in terms of professional services. but when customers implement with us, they know they're going to get a win. This is like one of the hotly, like most hot contested topics right now, but a lot of people want to know what's going to happen to the workforce and what's going to happen to headcounts. What do you think is going to happen as you've become super ingrained and like understanding the exposure of AI agents and their impact on headcount?

15:27I think you're going to see a lot less backfill of the traditional open roles. I think like every single role is going to be redefined to operate with agents. I think there's going to be a whole category of jobs that are going to go away and a whole category of jobs that are going to be created. But I'm also excited that a whole new category of entrepreneurs are going to be created. I will love to live in a world where capitalism wins and you don't need billionaires, but you have a lot of millionaires. We have a lot of hundred thousandaires. You know, you don't have to, you know, go grind it in college or like follow a career path when you can, you know, just build an agent and go sell it and just create your own business and own your own destiny.

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16:44That's C-A-R-T-A dot com slash S-O-U-R-C-E-R-Y. Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works. You type in an idea like AI-powered supply chain companies with positive free cash flow or defense tech companies growing revenue over 25 % year over year. Public's AI then dispatches a swarm of agents that scan every single U.S. stock, evaluates them, and instantly builds a custom index around your thesis. What really stands out is how clearly it explains why each stock is included.

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18:01Yeah, so for us, I think you and I were talking about how Palantir builds because we have a strong Palantir DNA. It has a little bit of the same sort of ethos in that But we are a very high agency kind of company. So when somebody joins, they're given a problem space to work into. And it's up to them to go figure out what to build. And the easiest way to figure out what to build is to go get forward deployed and talk to a customer, find out what it is that they need and build that. Chances are you're going to be correct. Because if there is one person out there that needs it, there's going to be a lot more who need it.

18:35So there's a lot of bad advice out there. It's like, oh, don't build things for one customer because you may not find others. If there is one, chances are there's two. You see what I mean? and you're going to be less wrong than not talking to a customer. You see what I mean? So there is a lot of that here in that a lot of everyone here is somewhat an AI native. We don't have to teach them how to use cursor or clock code. They immediately just pick it up and go. And we feel like the iterative nature of using AI just helps with the speed. Lastly, what are you most looking forward to in the next 12 months?

19:11I'm excited for our self-serve launch. We are still in soft launch. So, you know, we're putting a little bit of people through the pipeline. There's a lot to iron out in terms of, like, people getting through it. I am super excited about, you know, I just got out of a meeting with the CEO of one of the largest private equity firms. And I'm telling him what pay does. And he's like, look, man, I'm deploying agents in all my holding companies. And they're shit. They're not working. I'm not getting their return. All I hear is complaints. the numbers are wrong and blah blah blah blah it's early days right like so that we're getting through all the hard miles of like ironing out the issues of you know hallucination and bad you know uh tests and all these other things um i'm excited for a world in which this becomes more the norm as opposed to the exception right now we're treating agentic deployments as the exception just to see if it works in one or two years it's going to be more the norm and it's going to be more like you know what kind of agent are you and what is your performance i can't wait for that agents are going to take over the world.

20:12Pretty much. It's going to be great. It's going to be great. Yeah. Thank you, Manny. Thank you. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.